Money Wellness

Can I get a loan while on an IVA?

In most cases, it probably isn’t a good idea to take out a loan until you’ve completed your IVA and you’re back on track with your money. If you want to take out a loan - or any other form of borrowing - while on an IVA, there are strict rules. You’ll need permission from your insolvency practitioner to borrow more than £500.

What loans can’t you take out during an IVA?

You’ll need permission from your insolvency practitioner to borrow more than £500 from any lender. This includes:

  • personal loans
  • payday loans
  • overdrafts
  • credit cards
  • borrowing from friends and family
  • salary reduction schemes

Will my insolvency practitioner agree to me borrowing during my IVA?

In most cases, your insolvency practitioner will probably advise against further borrowing during an IVA. Lenders who are prepared to offer loans – or other forms of borrowing – to someone on an IVA will probably charge high interest rates. This could make it harder for you to get back on track with your finances.

If you’re struggling to pay your IVA, you should get in touch with your supervisor. They can reduce your payments by up to 15% if you can provide evidence of a change in circumstances. If you need more help, they can propose a variation to the terms of your IVA to try and get your payments reduced further.

Your insolvency practitioner is more likely to agree to some forms of borrowing than others, such as certain salary reduction schemes. This is because this kind of scheme can leave you better off at the end of the month.

For example, if you pay for a train season ticket loan through a salary reduction scheme, it may be cheaper than paying for standard train tickets each day. This would leave you with more disposable income each month, so your insolvency practitioner might agree to it.

Your insolvency practitioner will need to see full details of any scheme before agreeing you can go ahead.

Why can’t I borrow money off friends and family during an IVA?

The rule about getting permission from your insolvency practitioner to borrow more than £500 applies to borrowing from friends and family too. This is because you have to treat your creditors fairly during an IVA.

If you were to borrow from a friend or family member and repay them first and in full, you’d be showing them preferential treatment over the creditors in your IVA.

If you’re struggling to manage on your monthly budget, speak to your IVA provider about your options.

Can I get a loan to pay off my IVA early?

Some lenders offer IVA early settlement loans. Lenders promote these loans by saying they release you from your IVA early and help you build your credit score.

But IVA early settlement loans usually come with high interest rates. The chances are you’ll end up paying more and for longer than you would on your IVA.

If your circumstances improve and you’re keen to pay off your IVA early, you should talk to your IVA supervisor. They’ll be happy to talk you through your options.

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